Barclays 2008 Annual Report Download - page 20

18 Barclays PLC Annual Report 2008 |Find out more at www.barclays.com/annualreport08
Financial review
Income statement commentary
Net interest income
2008/07
Group net interest income increased 19% (£1,859m) to £11,469m
(2007: £9,610m) reflecting balance sheet growth across the Global Retail
and Commercial Banking businesses and in particular very strong growth
internationally driven by expansion of the distribution network and entrance
into new markets. An increase in net interest income was also seen in
Barclays Capital due to strong results from global loans and money markets.
Group net interest income includes the impact of structural hedges
which function to reduce the impact of the volatility of short-term interest
rate movements on equity and customer balances that do not
re-price with market rates. The contribution of structural hedges relative to
average base rates increased income by £117m (2007: £351m expense),
largely due to the effect of the structural hedge on changes in interest rates.
2007/06
Group net interest income increased 5% (£467m) to £9,610m (2006:
£9,143m) reflecting balance sheet growth across a number of businesses.
The contribution of structural hedges relative to average base rates
decreased to £351m expense (2006: £26m income), largely due to the
effect of the structural hedge on changes in interest rates. Other interest
expense principally includes interest on repurchase agreements and
hedging activity.
Business margins
2008/07
UK Retail Banking assets margin increased five basis points to 1.25%
(2007: 1.20%) reflecting increased returns from mortgages. The average
liabilities margin declined 14 basis points to 2.01% (2007: 2.15%)
reflecting the reductions in UK base rates in the second half of 2008.
Barclays Commercial Bank assets margin decreased 25 basis points to
1.55% (2007: 1.80%) due, in part, to a continued focus on lower risk term
lending. The liabilities margin declined two basis points to 1.47% (2007:
1.49%) partly reflecting the reductions in UK base rates in the second half
of 2008.
Barclaycard assets margin increased 41 basis points to 6.92% (2007:
6.51%) due to a change in the product mix with an increased weighting to
card lending, following the decision to stop writing new business in
FirstPlus.
GRCB – Western Europe assets margin increased three basis points
to 1.16% (2007: 1.13%) reflecting the focus on repricing assets and
strong growth in unsecured lending resulting in change in the product
mix. The liabilities margin decreased 40 basis points to 1.24% (2007:
1.64%) due to campaigns offering attractive deposit rates resulting
in margin compression.
GRCB – Emerging Markets assets margin decreased 167 basis points
to 4.95% (2007: 6.62%) reflecting higher funding costs, partially offset by
improvement in the product mix. The liabilities margin improved 142 basis
points to 2.17% (2007: 0.75%) driven by a change in the product mix and
a higher return from funding the assets.
GRCB – Absa assets margin increased nine basis points to 2.79%
(2007: 2.70%) as a result of a focus on pricing for risk and a change in the
composition of the book, partially offset by the higher cost of wholesale
Net interest income
2008 2007 2006
£m £m £m
Cash and balances with central banks 174 145 91
Available for sale investments 2,355 2,580 2,811
Loans and advances to banks 1,267 1,416 903
Loans and advances to customers 23,754 19,559 16,290
Other 460 1,608 1,710
Interest income 28,010 25,308 21,805
Deposits from banks (2,189) (2,720) (2,819)
Customer accounts (6,697) (4,110) (3,076)
Debt securities in issue (5,910) (6,651) (5,282)
Subordinated liabilities (1,349) (878) (777)
Other (396) (1,339) (708)
Interest expense (16,541) (15,698) (12,662)
Net interest income 11,469 9,610 9,143
Average balances
2008 2007 2006
£m £m £m
UK Retail Banking assets 90,263 78,502 73,593
UK Retail Banking liabilities 85,892 81,848 76,498
Barclays Commercial Bank assets 61,710 53,947 52,330
Barclays Commercial Bank liabilities 47,624 46,367 44,839
Barclaycard assets 23,552 18,976 17,728
GRCB – Western Europe assets 41,540 30,145 24,812
GRCB – Western Europe liabilities 10,429 7,489 6,404
GRCB – Emerging Markets assets 7,195 3,559 2,258
GRCB – Emerging Markets liabilities 7,568 5,115 4,018
GRCB – Absa assets 27,706 25,333 23,720
GRCB – Absa liabilities 13,454 11,511 10,897
Barclays Wealth assets 9,749 7,403 5,543
Barclays Wealth liabilities 37,205 31,151 27,744
Business margins
2008 2007 2006
%%%
UK Retail Banking assets 1.25 1.20 1.32
UK Retail Banking liabilities 2.01 2.15 2.05
Barclays Commercial Bank assets 1.55 1.80 1.92
Barclays Commercial Bank liabilities 1.47 1.49 1.46
Barclaycard assets 6.92 6.51 7.05
GRCB – Western Europe assets 1.16 1.13 1.11
GRCB – Western Europe liabilities 1.24 1.64 1.70
GRCB – Emerging Markets assets 4.95 6.62 8.46
GRCB – Emerging Markets liabilities 2.17 0.75 0.93
GRCB – Absa assets 2.79 2.70 2.81
GRCB – Absa liabilities 3.06 3.21 2.87
Barclays Wealth assets 1.04 1.11 1.08
Barclays Wealth liabilities 0.95 1.03 1.10